Fitch: Diversions from US West Coast could become permanent

Corianne Egan, August 11, 2014, JOC.com

Though negotiations between longshoremen and port employers on the U.S. West Coast have been uncharacteristically tame, the effects of the labor dispute on supply chains are beginning to become apparent, according to Fitch Ratings.

 

A statement from Fitch said that although both the International Longshore and Warehouse Union and the Pacific Maritime Association have pledged to keep cargo moving, the lack of a contract between the two means the ILWU could strike at any time. While the two parties have been publicly amicable towards each other, Fitch said shippers are still diverting cargo to avoid any potential problems.

 

“If this shift were to persist from weeks into months, some shippers may continue to use alternative ports even after the ILWU contract is finalized and the risk of a strike or slowdown has passed,” Fitch said. “The impact of such diversion could be exacerbated by the annual peak in shipping, which precedes the holidays.”

 

Diversions from the U.S. West Coast are already having an impact. Last week, DP World Vancouver announced it would not be accepting U.S.-bound cargo destined for trail transfers at its Centerm terminal, mainly because of a shortage of rail cars. CN Railway already reported it was sold out of intermodal capacity moving inland from Canadian ports through September because of a surge in traffic, much tied to diversions.

 

But the temporary cargo diversions in some cases could become permanent, Fitch noted, if the Canadian ports maintain their new customers. The ports of Prince Rupert and Vancouver are impacted the most, and have both seen volume jumps in recent months. Total TEUs moved through Port Metro Vancouver shot up 42 percent from March to 274,115 TEUs in May, the latest month for which data has been published.

 

However, Fitch noted that U.S. ports likely would only see a short-term decline in container volumes if a disruption occurred, as a strike or lockout would not last long.

 

The cargo diversions aren’t solely to the West Coast Canadian ports. Most East Coast ports saw year-over-year volume gains in May and June as containerized imports to the U.S. East Coast, compiled by PIERS, the data division of JOC Group, rose 3.6 percent year over year in May and 3 percent in June. Freight rates from Asia to the U.S. East Coast have been strong, partly reflecting the demand for services that bypass the West Coast.

 

Some ports have performed better. Containerized imports via Boston were up 10.7 percent in May. At Port Everglades, import volume was up 17.5 percent year-over-year in May and 12.7 percent in June. At Savannah, containerized imports rose 17.5 percent in May and 3.1 percent in June.

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